In the Kyoto Protocol framework, the EU committed itself to reducing its greenhouse gas (GHG) emissions by 20 percent until 2020 compared with 1990 levels. One of the main policies adopted to fulfill this goal is the European Union Emission Trading System (EU ETS): a cap-and-trade scheme for GHG emission allowances. In this project, we exploit the introduction of the ETS and its institutional changes to provide evidence of the causal impact of this European policy on firms' outcomes, disentangling the effects on profitability and productivity. This study is based on an original and comprehensive database of Italian manufacturing plants gathering data on EU ETS obligations and exchanged allowances, revenues, labor, polluting emissions and financial data. The empirical analysis combines robust and recent techniques for public policy evaluation with structural estimation of firms' production function. Preliminary results show a positive effect of the policy on productivity and heterogeneous effects among sectors.